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Film Financing In Nigeria Opportunities And Challenges

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Presentation on Nigerian Film Industry at the World Intellectual Property Organization (WIPO). Delivered in Geneva, 2009.

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Film Financing In Nigeria Opportunities And Challenges

  1. 1. FILM FINANCING IN NIGERIA: OPPORTUNITIES AND CHALLENGES prepared for the INFORMATION MEETING ON INTELLECTUAL PROPERTY FINANCING organized by the World Intellectual Property Organization (WIPO) Geneva, Switzerland March 10, 2009 Dayo Ogunyemi 234 Media Partners +234.803.390.9988 +1.917.309.8278 dayo.ogunyemi@gmail.com
  2. 2. FILM? IN AFRICA? WHY FILM FINANCE IS IMPORTANT  Arguably, movies currently constitute Africa’s most valuable intellectual property products;  The movie industry, driven primarily by Nigeria’s Nollywood, is the most active and valuable part of the internal knowledge economy in Africa today;  Movie industry growth vastly outpaces that of the publishing, music, and software industries;  It is therefore critical to Africa’s economic growth that its formal financial sector is able to engage productively with the movie industry. 1
  3. 3. …MEET NOLLYWOOD, NIGERIA’S FILM INDUSTRY   Nollywood is 3rd largest film industry in the world, after Hollywood and Bollywood;   In just over a decade and a half, Nollywood has grown from nothing to annual revenues estimated in the $200 - $300 million range;   Nollywood was developed by filmmakers adopting disruptive technologies – digital filming and editing equipment. Innovation has paid off – while global movie industry is looking to digital film as its future, Nollywood is entirely based on it;   Basic model is small-budget (typically under $150,000), quick turnaround (typically shooting schedule between 20 and 30 days), high volume. In recent years, growing attention to technical and aesthetic quality;   Huge and growing global fan-base, with well-established star system for talent;   Inspiration for small-budget digital movie making elsewhere on the continent – Riverwood (Kenya), Gollywood (Ghana). 2
  4. 4. GLOBAL MOVIE INDUSTRY STRUCTURE  The top three movie producing countries in the world by output are:   The United States - “Hollywood”   India - “Bollywood”   Nigeria - “Nollywood”  Globally, the movie industry typically has three main revenue prongs:   Theatrical Exhibition   Home Video   Broadcast/Ancillary  Of the three top movie industries, only Nollywood is wholly dependent on home video, which is sold through a semi-formal wholesale distribution network  This structural difference have profound consequences for formal third-party finance for film in Nigeria 3
  5. 5. COMPARISON OF REVENUE SOURCES Hollywood Bollywood Nollywood Home Video Home Video as % of total as % of total Ancillary Theater as revs revs (broadcast, % of total 98% 50% etc.) as % of total revs revs 17% Home Video as % Theater as % Other of total Ancillary Other Ancillary (broadcast, of total revs 16% revs Theater as 4% (broadcast, etc.) as % of 17% % of total etc.) as % of revs total revs total revs 2% 9% Other 0% Hollywood Bollywood Nollywood 4
  6. 6. HOLLYWOOD vs. NOLLYWOOD: INDUSTRY STRUCTURE United States Nigeria  “Major” dominated studio  No major studios built system – large corporate around production producers and distributors  Major distributors (known like Universal, Sony as marketers) who operate  Historically, active system a semi-formal wholesale of independent producers network  Well-defined revenue  Large numbers of picture consisting of independent/individual domestic and international filmmakers exhibition, home video,  Revenue picture almost pay TV, free-to-air entirely dependent on broadcast windows domestic home video sales
  7. 7. HOLLYWOOD vs. NOLLYWOOD: FILM FINANCING United States Nigeria  Major studios initiated and  Marketer (distributor) initiated financed and financed  Independent productions:  Independent producers:   Equity financing   Pick-up (Marketer buys   Pre-sales completed movie in its entirety)   Production loans (non-recourse,   Equity financing (self, friends & IP and contracts as collateral) family)   Negative pick-up (major buys   Personal loans (recourse, IP not some or all rights to completed accepted as contracts) movie)  Reducing risk:   Completion Guarantee   Errors & Omission Insurance
  8. 8. ELEMENTS FOR SUCCESSFUL FILM FINANCE  Establish clear chain of title - adequate documentation of permissions and ownership for all of the intellectual property rights underlying a movie as well as key contractual relationships  Efficacious registries for recording ownership and/or security interests in the completed movie – equity investors and debt providers need to be able to establish their claims to the economic value that a movie represents, even though it is an intangible asset. 7
  9. 9. KEYS TO IMPROVING NOLLYWOOD’S ACCESS TO FINANCE   Developing and formalizing multiple revenue streams –exhibition, home video distribution, broadcast   Establishing chain of title – documentation of ownership and contractual rights   Enabling the recording of security interests and transfers of rights through registries linked to IP ownership database   Increasing industry awareness and understanding on the part of financial institutions   Introducing risk-reducing financial instruments 8